This week marks the 40th anniversary of the Staggers Rail Act of 1980, which deregulated American freight…
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Happy 40th to the Staggers Rail Act, Which Deregulated and Saved the U.S. Rail Industry

This week marks the 40th anniversary of the Staggers Rail Act of 1980, which deregulated American freight rail and saved it from looming oblivion.

At the time of passage, the U.S. economy muddled along amid ongoing malaise, and our rail industry teetered due to decades of overly bureaucratic sclerosis.  Many other domestic U.S. industries had disappeared, and our railroads faced the same fate.  But by passing the Staggers Rail Act, Congress restored a deregulatory approach that in the 1980s allowed other U.S. industries to thrive.  No longer would government determine what services railroads could offer, their rates or their routes, instead restoring greater authority to the railroads themselves based upon cost-efficiency.

Today, U.S. rail flourishes even amid the coronavirus pandemic…[more]

October 13, 2020 • 11:09 PM

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Obama Administration Questions Others' Patriotism While Obstructing Bipartisan Corporate Tax Reform Print
By Timothy H. Lee
Thursday, July 31 2014
In his letter to Congress, Lew admits, 'The best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system.'

It may come as a surprise to many, but the United States imposes the developed world's highest corporate tax rate, with a combined federal and state average of 39.1%. 

Exacerbating matters, our corporate tax code is a hopelessly complex and convoluted one.  Among other defects, the U.S. code taxes not only domestic earnings, but overseas earnings as well, creating what Miles D. White of Abbott Laboratories describes as “a double whammy.”  As a result, domestic companies facing withering global competition increasingly must reincorporate overseas in order to survive. 

Is that somehow "unpatriotic?" 

Obama Administration Treasury Secretary Jacob Lew seems to think so.  In a letter to Congressional leaders this month, Secretary Lew proposed that the U.S. erect barriers to prevent companies from "lowering future U.S. tax liabilities": 

"Such transactions allow firms to reduce their level of worldwide taxation, but in the aggregate, they function to hollow out the U.S. corporate income tax base...  What we need as a nation is a new sense of economic patriotism, where we all fall or rise together." 

The problem with Secretary Lew's "fall or rise together" theory is that our current corporate tax code is so uncompetitive that it cultivates only the downside risk of falling, not the upside opportunity of rising.  That's why since 2005 alone, nearly fifty companies have reincorporated in countries with more hospitable corporate tax rules.  As we speak, Mylan Inc. is in the process of purchasing Abbott Laboratories’ generic drug business units in order to incorporate in the Netherlands.  Similarly, U.S. drug maker AbbVie seeks to merge with Ireland-based Shire, Walgreens is considering a switch to Switzerland and medical device enterprise Medtronic hopes to buy Ireland’s Covidien. 

And it’s easy to understand why they do it. 

Reincorporating to an overseas address results in immediate and enormous tax savings.  In Ireland, it means a savings of almost two-thirds, and in the United Kingdom, almost half.  Absent the change, American companies face a significant tax disadvantage vis-à-vis foreign competitors, whose low rates are much more rational and competitive. 

Far from "unpatriotic," as Secretary Lew suggests, companies that reincorporate are simply keeping their businesses afloat and preserving jobs in a difficult environment.  Their decisions are rational ones based on ensuring a healthy bottom line - which is exactly what they're under a legal obligation to consider as part of their fiduciary responsibilities.  Furthermore, these inversions are perfectly legal.  The law is extremely specific about the terms and conditions under which it may occur, and all of the companies above have complied with these regulations. 

The most unseemly part is that Secretary Lew understands and acknowledges the true problem.  In his letter to Congress, Lew admits, "The best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system."  Thus, he fully understands that companies reincorporate overseas in order to seek refuge from the complex and convoluted U.S. corporate tax code.  But instead of matching word with deed and putting his weight behind resolving the problem by lowering rates and reducing complexity, he pursues short-term partisan gain by engaging in divisive rhetoric.  That, more than anything that embattled companies are doing to reduce their oppressive tax burdens, could be labeled "unpatriotic." 

Equally "unpatriotic" are those in the Obama Administration and Congress who block progress toward comprehensive tax reform that liberals like Senator Ron Wyden (D - Oregon) and conservatives like Paul Ryan (R - Wisconsin) agree are critical.  For over 20 years now, Congress has debated corporate tax reform, with successive presidents and Treasury Secretaries urging action.  Despite that, the U.S. tax code has not been updated in almost 30 years.  It’s therefore little surprise that we find ourselves in our current predicament, with domestic multinational corporations holding over $2 trillion dollars overseas rather than subject it to double taxation under the highest rate in the developed world. 

Instead of accusing others of acting unpatriotically, Secretary Lew should prove his own patriotism by leveraging the power of his position and the Treasury Department to demand substantive and corrective action.  True patriotism means fixing the problem, not protracting it in order to achieve political gain while driving even more enterprises and jobs overseas. 

Question of the Week   
Which one of the following was the first 20th century presidential candidate to call for a Presidential Debate?
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Quote of the Day   
 
"Wait until Scranton hears about this.One of Joe Biden's ways of contrasting himself with President Trump has been to declare the election a battle of Park Avenue values vs. Scranton, Pa., values.Now we learn that Biden has secretly been playing footsie with China.The statement Wednesday night asserting that the former vice president was a willing and eager participant in a family scheme to make millions…[more]
 
 
—Michael Goodwin, New York Post
— Michael Goodwin, New York Post
 
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Do you believe you will be better off over the next four years with Joe Biden as president or with Donald Trump as president?